And why Diwali is a great time to do so
Diwali means different things to different people. For kids of course it is crackers; for those living away from their families it is time to go back home or wistfully remember their loved ones.
Diwali is flowers and sweets and crackers and fun but it is also a festival that signifies the triumph of good over evil and marks the end of darkness. So let there be light and Diwali is a good time to end ignorance about your CIBIL score with the light of knowledge.
Why understand your CIBIL report?
Before you understand your CIBIL report it is important that you figure out the significance of it and why it makes sense to be well versed with it. CIBIL is a three digit number that indicates you credit worthiness on a scale of 300 to 900.
The CIBIL report is a comprehensive and detailed document that carries your personal information, details about loans, payment history and some other information apart from the credit score.
A good score makes it easy for you to get a loan sanctioned while a low score could virtually make it impossible for you to get a loan from mainstream banks.
A credit report can help you assess your financial health, get you good deals on loans and also impact your employability. Understanding what each aspect in the report means will help you point out any discrepancies if any in your report, understand what the problems areas are so that you can improve them.
CIBIL report: Points to ponder
Personal and employment related information
This aspect is pretty simple and self explanatory. Details like name, DOB, contact information, PAN, employment details etc are included in the CIR (Credit Information Report). In these sections it is most important that you check that all details mentioned are correct and there are no mistakes in it.
If any discrepancies are spotted it is best to get them corrected at the earliest.
This is definitely the part that deserves maximum attention in your report. Here information about all open loans and credit cards is listed.
The loan type, lender details, when the loan was procured, outstanding amount, details about the last payment and records for payments made for last 36 months. If any piece of information is disputed it will be indicated by a red band against it.
You must go through this section carefully to make sure that no loans that do not belong to you are mentioned here or there are no open loans which you had assumed to be closed or a default is not mentioned erroneously.
Whenever you apply for a loan the prospective lender seeks you CIBIL Report and this is known as a hard enquiry and is mentioned in the report. So all enquiries made by FIs are listed here along with the name of the FI, when the information was sought, loan type.
This also impacts your credit rating. However if you seek your report for your reference then it is known as a soft enquiry and will not impact the credit rating.
A little about the score
The score is generally a three digit number between 300 and 600. Anything below 650 is a cause of worry and depending on how far you are from 650 will decide the criticality of the situation.
Above 750 is a safe place to be in and between 650 and 750 it means there is room from improvement but things are fairly good.
What does NA or NH mean?
Sometimes instead of a credit score (three digit number) you may get a NA or NH as your score. This implies that you have no credit history as you may have no loans or credit cards (current or present) or your credit history is less than six months old which means it cannot be rated. This is not a negative thing; however if you have no credit history you could look for ways to start one.
So while you get ready to celebrate Diwali with your loved ones do take so time out to get your finances in order and do spare time to understand you CIBIL Report!
Photograph: Creative Commons
The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.